Question
Which of the following is not the advantage of VaR? It is easy to understand. It shows the expected loss given that the loss is
- Which of the following is not the advantage of VaR?
It is easy to understand.
It shows the expected loss given that the loss is greater than the absolute VaR level.
It is the loss level that will not be exceeded with a certain probability.
It captures an important aspect of risk in a single number.
2.Which of the following bonds has the longest duration?
7-year, 7% coupon bond
7-year, 12% coupon bond
14-year, 7% coupon bond
14-year, 12% coupon bond
3.One investment project has a probability of 0.03 of a loss of $20 million and a probability of 0.97 of a loss of $2 million during a one-year period. What are the 95% VaR and expected shortfall (ES) for this project?
VaR = $2 million; ES = $20 million
VaR = $20 million; ES = $12.8 million
VaR = $2 million; ES = $12.8 million
VaR = $20 million; ES = $0.64 million
4.Suppose that you have a bond position worth $100 million. Your position has a modified duration of 8 years and a convexity of 150. By how much does the value of the position change if interest rates increase by 25 basis points? Use the duration-convexity rule.
($1,953,125)
($1,906,250)
($2,046,875)
($2,187,500)
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